I had to install PowerShell 3.0 on my Windows 7 SP1 VMware Fusion 8.5 VM earlier today and grabbed the installer from https://www.microsoft.com/en-us/download/details.aspx?id=34595. The download was done from Chrome on my Mac and saved to my Mac’s Downloads folder.
I have Shared Folders running in Fusion so I have direct access to the Downloads folder from Windows via the Z:\ drive presented to Windows.
When I ran the .msu file from z:\downloads I would receive an error which said:
Installer encountered an error: 0x80070003 The system cannot find the path specified.
The fix is to copy the .msu file to a VMDK based disk in the VM and run it again.